VW seeks savings with facilities JV

WOLFSBURG, Germany -- Volkswagen AG and building firm Hochtief said on Friday they had launched a joint venture which could allow VW to save on factory and office block overheads. The new firm will organise services such as security, catering, maintenance, refuse disposal and gardening more cheaply and more efficiently than the host of contractors presently involved, VW and Hochtief said.

"This is part of our cost-cutting strategy," VW chief financial officer Bruno Adelt told a news conference at the firm's headquarters in the northern city of Wolfsburg. "I cannot yet answer (how much VW will save)."

VW, Europe's biggest carmaker, is under pressure to cut costs as it is faced with a likely drop in unit sales this year but has pledged to maintain its earnings at last year's level.

The new company, car.e Facility Management GmbH, is 51 percent owned by Hochtief and 49 percent by two VW units. Next month it will take over the management of VW's new high-tech factory in Dresden which builds the luxury Phaeton model.

Car.e would also take over the running of various other VW buildings and would offer its expertise to other carmakers and auto parts suppliers, it said.

But, highlighting that the project is still in its infancy, Hochtief Facility Management board spokesman Markus Breithaupt said projects such as VW's enormous Wolfsburg factory were still being looked at for possible future bids.

He said car.e's revenues would be 5-7 million euros in its first half year, growing to 20 million euros for 2003 and 100 million euros by 2005. The firm is hoping to make a five percent profit margin on its activities.

Hochtief chief executive Hans-Peter Keitel said 85 percent of the costs associated with an office block or factory were generated after it was built and, by using a single facility management firm, companies could save 15-20 percent of those costs.